City officials would prefer that you don't call it a "debacle," or even a "mistake." They say it's a "transition to a new approach to delivery."
Whatever you want to call it, one of the largest contracts ever awarded by the City and County of Denver is being scrapped years ahead of the project's scheduled completion.
After months of escalating disputes over cost overruns and delays, Denver International Airport will terminate its $1.8 billion contract with the development consortium it chose to oversee a massive terminal renovation project in 2017, officials said today, August 13. DIA CEO Kim Day said the airport notified Great Hall Partners of the termination on Monday night, following a breakdown in a formal mediation process that had begun earlier this summer.
"We entered into mediation with the developer in June in good faith, hoping to resolve all these issues, and have been unable to reach agreement," Day said at a press conference this morning. "We are very far apart in terms of cost and schedule, and our values — prioritizing safety, the passengers' experiences, and airline operations."
DIA began remodeling the Great Hall in July 2018 through a $1.8 billion contract with Great Hall Partners, a consortium that includes Ferrovial Airports, Saunders Construction and JLC Infrastructure. The renovation is supposed to add more dining and shopping options and overhaul airport security and the airline check-in space to accommodate the boom in passengers DIA has experienced in recent years.
But the project has been fraught with problems since at least February, when the contracting team reported weak concrete in the main floor of the terminal that, coupled with changes DIA has requested and other delays, could add hundreds of millions of dollars in costs and years of delays to the project that was originally scheduled to be completed by November 2021. In its last official estimate, delivered in May, Great Hall Partners said that it didn't expect to complete the project until 2025, with cost overruns of over $300 million on top of the project's original $650 million construction budget.
The problems encountered by the Great Hall project represent yet another disappointment for the so-called public-private partnership model that has been utilized repeatedly by major infrastructure projects in the Denver region over the last two decades, including the Regional Transportation District's Eagle P3 project — which has faced similar issues and legal disputes between public officials and private contractors. Day said that rather than seek a new development partner, the airport will assume control of the project itself, and hire contractors to complete the work.
"As we procure our new team, we will proceed through the city approval process, which includes going to city council," Day said. "We hope to have a new contractor mobilized and on-site in early 2020."
Day said that the airport is committed to staying within the Great Hall project's original $770 million overall construction budget — which includes a $120 million contingency fund — but noted that it "may have to change the scope" of the renovation in order to do so. She said is confident can "beat" the 2025 timeline outlined by Great Hall Partners earlier this year, but did not offer further specifics.
In addition to construction, Great Hall Partners' contract included the operation of concessions following the completion of the terminal renovation, which will now be directly managed by the airport, potentially defraying some of the costs associated with delays and contract termination.
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"We will be operating the concessions that will eventually be in the terminal, as we complete the project, via our traditional means of operating concessions as they are in the concourses now," said airport CFO Gisela Shanahan. "Which means that 100 percent of the revenue share from those concessions will now come to the airport."
Led by then-mayor Federico Peña, DIA opened in 1995 and was the first new airport in the U.S. in at least twenty years. Passengers have more than doubled since the airport's inception, from 31 million to 64.5 million last year, and it's now the fifth-busiest airport in the U.S.
The airport is a priority and source of pride for Mayor Michael Hancock, who frequently boasts about the increasing number of international flights DIA has added during his tenure. Hancock also strongly advocates for an "aerotropolis" project that would add commercial and residential development to land around the airport in parts of northeast Denver, Aurora and unincorporated Adams County. But his challengers during this year's election often used the problems plaguing the Great Hall redevelopment as ammunition. In May, Jamie Giellis, who lost to Hancock in a run-off, accused him of covering up cost projected overruns and delays; Hancock later said they were overblown.
"You want everything to be successful; you want every agreement that you make to be profitable for both sides," Day said. "I'm just sorry that we had to make this change. But it is the right thing for us, and it's the right thing for the city."